Retail price impacts from the Iran war are uneven but add up for US
households before midterms
[October 17, 2026] By
CATHY BUSSEWITZ, WYATTE GRANTHAM-PHILIPS, RIO YAMAT, DEE-ANN DURBIN,
ANNE D’INNOCENZIO and MAE ANDERSON
NEW YORK (AP) — More than seven months into the U.S. war with Iran,
sharply higher fuel prices are making it more expensive to drive and fly
and adding to the cost of some goods, prolonging the strain on American
households as the midterm elections approach.
Motorists and airline passengers have borne the clearest consequences as
the fighting disrupts Middle East oil shipments. Some companies have
raised delivery charges or prices on selected products. Yet the higher
cost of making and moving goods has not translated into across-the-board
price increases at stores.
Shoppers may not be spared indefinitely, though. Many companies have
absorbed at least part of their higher production and transportation
costs. A September jump in wholesale prices suggests some businesses may
eventually charge more if fuel prices stay elevated.
The chief economist at Moody's Analytics, Mark Zandi, estimated this
week that the war has cost the average U.S. household the equivalent of
almost $2,000, including $1,100 in higher energy prices, $540 in higher
interest rates and $360 in military costs. The energy portion is growing
by $50 a week at current fuel prices, Zandi said.
Here's a look at price changes since the war began and which goods and
services could be most susceptible to increases in the months ahead:
Filling up fuel tanks is noticeably more expensive
BEFORE THE WAR: Regular gasoline averaged $2.98 a gallon nationwide and
diesel $3.76 almost eight months ago, according to AAA. Gas peaked at
$4.56 in May, below its 2022 record, while diesel reached a record $6.53
in September.
WHAT'S REACHED CONSUMERS: On Friday, the national average stood at $4.33
a gallon for gasoline, or 45% above its prewar level, and was up 68% for
diesel at $6.33, AAA reported. Gas typically costs less in the fall, and
this is the first October a gallon of regular gas has cost more than $4
on average, it said.
Expensive diesel is less apparent to most U.S. residents but contributes
to overall inflation by raising the cost of moving goods.
WHAT COULD COME NEXT: Shipping through the Strait of Hormuz remains
dangerous and constrained, prolonging uncertainty over oil supplies and
fuel prices. The Energy Information Administration said this month that
it expected winter heating costs to be 21% higher for the roughly 3% of
households that rely on heating oil, most of them in the Northeast,
assuming the weather is mild.
Higher airfares are hard to escape too
BEFORE THE WAR: Jet fuel averaged $99 a barrel worldwide before the war,
doubled to $209 in April and climbed back to nearly $195 in September
after a spring decline, according to the International Air Transport
Association.
WHAT’S REACHED CONSUMERS: Airlines have raised ticket prices and fees,
trimmed schedules and shelved plans to add flights. Airfares cost about
22% more in September than they did a year earlier, the consumer price
index showed. Average domestic airfares rose from $405 in late 2025 to
$445 in the April through June period of this year, excluding optional
fees, according to the U.S. Bureau of Transportation Statistics.
WHAT COULD COME NEXT: Fuel price volatility makes it harder for airlines
to plan and could discourage them from lowering fares even when fuel
prices start to fall, analysts said. United Airlines pulled some
December flights and warned of further possible cuts in 2027. Fewer
available seats could mean less pressure to hold ticket prices down.
Higher fares have covered substantial portions of higher fuel costs for
domestic airlines but not enough to prevent a squeeze on their
third-quarter profits, according to consensus estimates.
Any growth in grocery prices pains Americans after multiple years of
food inflation
BEFORE THE WAR: The U.S. Department of Agriculture initially expected
grocery prices to rise 1.7% this year, below the historical annual
average. USDA now expects a still comparatively modest 2.4% increase.
WHAT HAS REACHED CONSUMERS: Individual food prices can be volatile, and
it’s not clear how much of this year's expected increase is due to the
war and how much is due to other factors, including tariffs, unfavorable
weather and higher labor costs.
[to top of second column] |
A shopper looks the meat section of a grocery story in Fort Worth,
Texas, Wednesday, Oct. 7, 2026. (AP Photo/LM Otero)
 Cornell University economics
professor Chris Barrett said he was surprised grocery prices haven’t
risen faster given higher costs for diesel, fertilizer and
refrigeration. USDA revised its 2026 fertilizer cost estimates for
major crops upward by 9% to 13% and fuel, lubricant and electricity
estimates by 33% to 41%.
Barrett suspects retailers are absorbing some increases to avoid
alienating fed-up customers after multiple years of food inflation.
Grocery prices in September were about 22% higher than five years
earlier.
WHAT COULD COME NEXT: Experts have warned that fresh produce and
other frequently replenished perishables could respond quickly to
higher transportation and refrigeration costs. Barrett sees “very
little prospect" of a significant reduction in fuel prices that
could ease the pressure on farmers and truckers.
A strengthening El Niño weather pattern could damage crops through
drought, heat or flooding, the U.N. Food and Agriculture
Organization warned. That could lift commodity prices, although
ample inventories and good harvests elsewhere may limit the impact
on groceries.
Rubber meets the road when it comes to shoe prices
BEFORE THE WAR: Nearly all shoes sold in the U.S. are imported, and
roughly 70% of the materials in a synthetic shoe are
petrochemical-based, according to Footwear Distributors and
Retailers of America. The industry trade group opposed Trump
administration tariffs last year.
WHAT HAS REACHED CONSUMERS: Footwear prices were 3.4% higher in
September compared to 12 months earlier, according to the consumer
price index. Men's shoes went up the most, by 4.5%.
WHAT COULD COME NEXT: While import costs are down from a year ago,
the footwear trade group said oil prices, tariffs and geopolitical
uncertainty are likely to keep retail shoe prices rising into 2027.
"Footwear companies are working hard to keep shoes affordable, but
there is a limit to how much additional cost businesses can absorb
before those pressures reach consumers,” FDRA President and CEO Matt
Priest said.
Transportation costs add up throughout product supply chains
BEFORE THE WAR: The cost of moving goods and delivering packages was
already increasing and depended on more than fuel.
WHAT HAS REACHED CONSUMERS: It's not clear. September producer-price
data showed that transportation and warehousing of goods sold to
businesses as inputs cost 10.2% more than a year earlier. Prices for
truck and water freight services each rose 19.3%. The indexes
measure what transportation providers charged but do not show how
much of the increase appeared in retail prices.
Consumers have felt the higher costs most directly when sending
packages. The U.S. Postal Service raised base prices 8% in April for
Priority Mail Express, Priority Mail, Ground Advantage and Parcel
Select, citing increased transportation costs. UPS, FedEx and DHL
also impose fuel surcharges on many shipments.
WHAT COULD COME NEXT: Shipping costs could remain elevated during
the holiday season even if oil prices ease. Third-party provider AFS
Logistics and financial services company TD Cowen project record
parcel costs this quarter and the highest truckload rates since
early 2022.
“We expect fuel to drive elevated transportation costs for the
foreseeable future,” AFS Logistics CEO Andy Dyer said.
Although UPS and FedEx surcharges could decline if diesel and jet
fuel prices fall, changes to carrier surcharge formulas, holiday
fees and tight trucking capacity could keep total shipping bills
elevated, AFS said.
__
Grantham-Philips contributed from Chicago, Yamat from Las Vegas and
Durbin from Detroit.
All contents © copyright 2026 Associated Press. All rights reserved |
